Tuesday, 13 June 2017

Payday Loans Complaints Increase by 227%: A Social Time Bomb

Today’s post looks at the recent news that, according to the
Financial Ombudsmen Service in the U.K., complaints over the last year
regarding so-called ‘payday loan’ companies have increased
by an incredible 227%, whilst complaints relating to consumer credit more
broadly have increased by almost 90% to around 26,000. We have looked at this
issue before here in Financial Regulation
Matters on a number of occasions – most notably with regard to the Financial
Exclusion Committee – so today we will assess these increases and the
supposed rationale for them. However, as is usually the case when we look
closer at any issue, there is a growing underlying issue which is intensifying
at every turn.

The figures released by the Financial Ombudsman Service relate
to most sources of credit, with the majority of complaints still being
concerned with Payment Protection Insurance. Whilst some areas for complaint in
relation to credit went down – complaints about banks for example – the general
rise in relation to personal credit has been described as ‘striking’
by the CEO of the Financial Ombudsman Service, which follows on from the
warning from the Bank of England earlier this year on the rapid
expansion of personal credit in the marketplace. It has been suggested that
one of the reasons for such a rapid increase is the availability
of credit now, in conjunction with the increased
knowledge of consumer rights, although this has been countered by
attempting to understand the wider issues. Writing in The Independent, one commentator notes
how ‘increases in the cost of essentials such as children’s clothing, and food,
have started to play an important role in the inflation figures’, which he then
continues to state that ‘if you’re struggling, if it’s a choice between a
high-interest loan and not feeding your kids, what are you going to do?’. The
picture painted by the commentator is bleak, but we must examine it to see if
it holds up.

The Conservative Manifesto contained a pledge to remove the
ability to eat a free school lunch from over 900,000 children, a move which the
Education Policy Institute confirmed would affect children coming from ‘ordinary
working families’. This came after the move to end universal free school
lunches for infants – replacing them with free breakfasts instead – which will
cost the families of those affected £440 per child per year and save the
Government £650 million per year, a move which ‘risks
punishing exactly the kind of families the prime minister has promised to help’.
This post has chosen the subject of ‘children’ as its focus, but in reality it
could be anything – mental health, disability, discrimination – society is
being torn apart by the incessant quest to have the country pay for the actions
of the elite during the turn of the century. Reports like that of the Institute
for Fiscal Studies, that May’s welfare cuts will push ‘almost
one million more children into relative poverty by 2022 and two thirds of those
affected will live in working households’, do not seem to stemming the
tide. The connection between looking at young families and payday loans is
worthwhile because, as the commentator implied earlier – people will turn to high-interest lenders when
it comes to caring for their children. The policies of this government are
concertedly putting these ‘just about managing families’ into that predicament,
which is likely the underlying reason for the Conservative Party failing to win
a majority in the recent election – the recent statement by the Prime Minister’s
new Chief of Staff, Gavin Barwell, that the Party has to look at ‘ending
austerity’, is a clear indicator that the well is beginning to dry up. When
it comes to denying children free lunches at infant schools, it is clear that
there is nowhere left for the Government to go in their mission to have the
country pay for the costs of the few. As has been repeated before here in Financial Regulation Matters, the focus
is on the Conservative Party because they are in power and their actions must be
scrutinised, but when Children are potentially going hungry whilst in a place
of mandated education, enough is surely enough. The suggestion by the Financial
Conduct Authority, that the cap on charges by payday loan companies – which has
seen their numbers reduce – should
be lifted so as to avoid ‘illegal lending’, however, suggests that the
powers that be do not agree that is enough is enough, which is an incredible
thought when one looks at the ferociousness of this assault that is labelled as
‘austerity’; who else can be disadvantaged in its name?

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